Management indicated dividends are likely to remain at current levels for the next two to three years, but it's in the unpacking of the divisional results that Telstra's performance really shines.

As we all know, the fixed-line phone business is dying. But while PSTN (fixed-line) revenues fell 11 per cent to $2.2 billion, this was partly offset by growing fixed-line internet revenue, and the overall fall was less savage than expected.

Revenue from the NBN agreement also hit $176 million for the half and is likely to peak over the next few years.

The troubled Sensis business experienced revenue falls of 13 per cent, only partially offset by increases at Foxtel, but compared to Telstra's three main businesses, these are incidental numbers.

Advertisement

Mobile telephony, mobile internet and network services will be the main source of future profits. And in these areas Telstra is doing very well, leaving its competitors in its wake.

The company added 607,000 new mobile customers (phone and internet) in the half, boosting divisional earnings 5 per cent to $4.6 billion.

Meanwhile, Vodafone continues to bleed customers and Optus recently mooted the end of mobile market growth. Telstra appears to have no such problem. More competitive pricing and a superior network are proving to be a winning combination.

Mobile internet also continues to grow, with Telstra adding 218,000 customers in the half and revenue growing 17 per cent to $576 million, largely due to increased tablet use.

Network applications and services revenue grew 11 per cent to $636 million as it sold more bundled communications services (such as cloud-based software) to business customers. In years to come, this too may be a multi-billion-dollar business.

Telstra should fare well over the next few years, thanks to a growing market share, organic growth and NBN revenues. But trouble looms beyond that.

Falling data prices, rising capital expenditure requirements and a more competitive landscape due to the NBN should make earnings growth harder to come by.

Chief executive David Thodey is making Telstra a more nimble and customer-focused business – complaints to the Telecommunications Industry Ombudsman, for example, fell 10 per cent in the six months to December – but it needs to be.

The rollout of the National Broadband Network means Telstra will lose its wholesale monopoly and will have to compete more aggressively for customers. This will be a fundamental change in the company's competitive landscape.

At today's price above $4.60, Telstra is no bargain given that fact. There are worse places for your money but for income investors especially, there are better ones, too.